A company currently has no debt and its beta is 1.20. Its tax rate is 35%. The manager wants to change the capital structure. The expected debt is 40% and equity is 60%. If the market risk premium is 7.0%, and the risk-free rate is 6.0%, what is the change of the company's cost of equity?
- 3.451%
- 3.640%
- 3.892%
- 3.910%
- 3.968%